The Government of Canada has introduced bold changes to make homeownership more accessible for Canadians, particularly focusing on younger generations who tend to continue to live with their parents due to financial challenges. Rising real estate prices and high mortgage payments have become a considerable barrier to affording homes.

On August 1, 2024 the government took action to counter these issues by enacting new mortgage rules aimed at making the dream of becoming a homeowner a reality. This move marks a significant step towards making homeownership accessible in Canada.

Key Changes in Canada’s 2024 Mortgage Rules

The Honourable Chrystia Freeland, Deputy Prime Minister and Minister of Finance announced that the two new measures will come into effect on December, 15, 2024:

1. Increase in Mortgage Insurance Cap to $1.5 Million

For the first time since 2012, the mortgage insurance cap will rise from $1 million to $1.5 million, a crucial adjustment reflecting the current housing market. This will allow more Canadians to qualify for a mortgage with a downpayment below 20%.

• Impact on Urban Markets: Homebuyers in major urban cities, like Toronto and Vancouver, will significantly benefit from this change since these areas observe home prices that exceed the $1 million cap.
• Down Payment Reduction: Buyers will soon be able to purchase a $1.5 million home with a down payment as low as $125,000, which is a substantial reduction from the current $300,000 requirement for uninsured borrowers.

Eligibility for High Loan-to-Value Mortgage Insurance:

• The total loan-to-value ratio must be 80% or more.
• The residential property’s value must be below $1.5 million.
• Down payment requirements are:
  • 5% for the first $500,000 of the purchase price.
  • 10% for any portion of the price between $500,000 and $1.5 million.

2. Introduction of 30-Year Mortgage Amortizations for First-Time Homebuyers

There will be an expansion of eligibility for 30-year insured mortgage amortizations to first-time homebuyers and buyers of new builds, which will assist in reducing the cost of monthly mortgage payments.

• Encouraging New Construction: Since it is becoming more accessible to become a homeowner, this stimulates the housing market by incentivizing the construction of more housing. Under these rules, newly constructed homes that have not been previously occupied, as well as new condos with interim occupancy periods, will qualify.

Eligibility for 30-Year Mortgage Amortizations:

• The loan-to-value ratio must be 80% or more.
• The borrower must either be:
  • A first-time homebuyer, or
  • Purchasing a newly constructed home.

To qualify as a first-time homebuyer, the borrower must meet one of the following:

• Never previously purchased a home.
• In the last 4 years, the borrower has not lived in a home owned by themselves or their spouse/common-law partner.
• Recently experienced the breakdown of a marriage or common-law partnership.

How These Mortgage Changes Impact the Canadian Mortgage Charter

The 2024 mortgage regulations build upon the Canadian Mortgage Charter, which was introduced in the 2024 Canadian federal budget. One noteworthy feature of the charter allows insured mortgage holders to switch lenders at renewal without undergoing a new mortgage stress test. This promotes competition in the mortgage market, giving more Canadians the freedom to seek better and more affordable mortgage deals.